Analyzing Tuesday's trades:
GBP/USD on 1H chart
GBP/USD also started a very weak downward movement on Tuesday, triggered by a bounce off a technical level. Similar to the euro, this bounce and the minor decline do not necessarily suggest a brewing downward trend. The pound sterling has been rising for a month and a half, with the last three weeks showing upward movement for no apparent reasons. Therefore, we wouldn't be surprised if the price surpasses the 1.2787 level in the near future, and the pound sterling will continue to rise.
If we talk about logical and predictable movement, the pound is expected to decline. The higher the British currency climbs, the stronger the subsequent fall should be. The market cannot continuously buy the pound for no reason. But it is ready to buy even amid a negative macroeconomic and fundamental backdrop for the pound.
GBP/USD on 5M chart
A sell signal was formed on the 5-minute timeframe. At the start of the US trading session, the price bounced off the 1.2787-1.2791 area. The bounce wasn't precise, but it was enough to open short positions. By the end of the day, the pair fell by about 15-20 pips. The pair's volatility for the entire day was 45 pips. This is decent.
Trading tips on Wednesday:
On the hourly chart, the GBP/USD pair has great prospects for forming a downward trend, but the bullish correction remains intact. The fundamental backdrop continues to support the dollar much more than the British pound, but the pound continues to rise. Macroeconomics and fundamentals do not always support the pound, but the market interprets almost all the news in favor of the British currency.
Logically speaking, we expect the pound to fall on Wednesday, but considering the fact that the market doesn't need any reason to buy, the pound can still rise. Overcoming the trend line will not necessarily mean that a downward movement will follow.
The key levels on the 5M chart are 1.2372-1.2387, 1.2457, 1.2502, 1.2541-1.2547, 1.2605-1.2611, 1.2648, 1.2691, 1.2725, 1.2787-1.2791, and 1.2848-1.2860. Today, there are no significant events scheduled in either the UK or the US. Therefore, we expect weak movements based on "pure" technical analysis. The pound sterling can start a new rise as it absolutely does not need support for this.
Basic trading rules:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trendline or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
How to read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginners should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
